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Promises, promises …?

Friday 24th November 2017

‘A Budget to build a Britain fit for the future’ – or a ‘record of failure from a government that has let people down and is no longer fit for office’?

Budgets are usually more about the politics than the economics but none more than Wednesday’s outing for the Chancellor. Few would envy a man having to produce a Budget that needed to stabilise his own job as well as that of his boss, boost his party and calm a fractious electorate. Budgets are pretty much theatre pieces but Philip Hammond faced the prospect of being the pantomime villain for just about everyone in some way or another.

Preceded by a noisy PMQs, anticipation and expectation was high. And, knowing that he had very little room for manoeuvre, speculation was rife as to what he might actually announce. But he was silent on many hoped-for policies and areas where he was expected to create some slack for spending were left untouched. There was virtually nothing for savers.

Unsurprisingly, constrained by the uncertainty of the Brexit negotiations this factor hung like a shadow over everything. Referring to a ‘deep and special partnership’ that this Government wants to nurture with the EU, and declaring that they will ‘meet challenges and embrace change’ he was keen to paint a bright horizon for a post-Brexit Britain. And he promised a further £350m for Brexit preparations, with more to be made available should it be necessary. He also announced extra funding for the NHS, including an injection in time for this winter. The BBC’s Laura Kuenssberg, tartly noted on Twitter: ‘money for Brexit prep is around the same as extra cash for the NHS’. Not sure we’ll see that on the side of a bus though.

His opening remarks were big on positivity: a growing economy, opportunities post-Brexit, and highlighting that Britain is at the forefront of a technical revolution. But he was unable to ignore the Office for Budget Responsibility’s (OBR) forecasts that actually downgraded the economy, productivity, and business.

But in these situations, chancellors always manage a trumpeting of some thing. For today it was that borrowing costs are down; although debt will peak this year it will gradually fall as a percentage of Gross Domestic Product (GDP), and the OBR’s forecast for jobs growth: an additional 600,000 people in work by 2022.

He unveiled a number of measures to boost the housing market – the biggest of which was abolishing stamp duty for first time buyers on homes costing up to £300,000 (or the first £300,000 if the property costs up to £500,000 in high-value areas such as London). However, the OBR swiftly pointed out that this policy is likely to push house prices up by 0.3% and will actually benefit existing homeowners, with most of the effect occurring in 2018.

There will be an increase in the personal tax allowance to £11,850 from April next year, an increase in duty on tobacco products and high-strength alcohol but duties on other ciders, wine and beer to be frozen. Some changes to the Universal credit system, and the publication of the Government’s emerging thinking of the tax system in a digital age.

There was investment in infrastructure, education, NHS, and technology, some help for small businesses with business rate increases now to be set by the Consumer Price Index (CPI), and a new rail card for millennials.

The detail will continue to picked over for some time yet but will it produce a ‘dynamic and innovative economy’ that will produce ‘a fairer Britain’? Or is it, as Labour says ‘an opportunity missed to help real lives’ and will they fall short of their promises as they have done before?

Here are the key announcements:

Growth revised down to 1.5% with forecasts of 1.4% in 2018, 1.3% in 2019, 1.3% in 2010, 1.5% in 2021 and 1.6 in 2022

Borrowing is down to £49.9bn this year with £39.5 in 2018 to 25.6bn in 2022/23

Personal tax allowance to rise to £11,850 and higher rate threshold (40%) to rise to £46,350 in April 2018

Lifetime allowance for pension savings will increase in line with CPI inflation from £1m to £1.03m for 2018/19

Annual limit for Junior ISAs and child trust funds for 2018/19 will be up-rated in line with CPI inflation to £4260

Plan announced to double EIS investment limits for ‘knowledge intensive’ companies while ensuring that EIS vehicles are ‘not used as a low risk shelter for capital preservation schemes’. This will be done through a new fund in the British Business Bank seeded with £2.5bn of public money

National Living Wage to rise to £7.83 per hour from April 2018

£1.5bn to remove 7 day waiting period for universal credit; new claimant in receipt of housing benefit will get it for two weeks while they wait for their universal credit payment

£125m funding to help low income families with rent

Stamp duty abolished for first time buyers on properties costing up to £300,000 or the first £300,000 of a property costing £500,000

£44bn in overall government support for housing to meet target of 300,000 home a year by 2025

Councils given powers to charge 100% council tax premium on empty properties

Compulsory purchase of land with planning permission held by developers if proven to be held for financial reasons

£400m to regenerate housing estates and £1.1bn to unlock strategic sites for development

£28m for Kensington & Chelsea council to provide counseling services and mental health support for victims of Grenfell Tower fre and for regeneration of area

New homelessness task force

Increase in road tax for most polluting diesel cars (not vans) from 2018 with the proceeds to £220m clean air fund

Fuel duty remains frozen

£400m fund for charging infrastucture for electric cars

£406m investment in maths and technical education. Schools and colleges that support their students to study maths will be rewarded with £600 for every pupil that takes Maths, or Further Maths A levels or Core Maths

£30m to develop digital skills distance learning courses

A young persons railcard for 26-30 year olds.

Freeze on short-haul air passenger duty (APD) and long-haul economy APD from 2018, to be funded by an increase on tax for private jets

Duty on all tobacco products to increase by 2% above RPI inflation until the end of this parliament and hand-rolling tobacco to increase by an additional 1% from November 2022

An extra £2.8bn for the NHS with an immediate cash injection of £350m for this winter, £1.6bn between 2018/19 and the remaining £850m between 2019/20

Up-rating of business rates to be based on CPI inflation brought forward by two years. £1000 discount for pubs extended to March 2019

VAT threshold for small businesses of £85,000 to remain for two years

£2.3bn for research and development, with £500m for a range of initiatives including artificial intelligence, fibre broadband and 5G